eBulletin

eBulletin is a complimentary service to our clients and friends to provide individual and business tax information throughout the year via short emails. If you would like to receive our eBulletin, simply email Janice Chaffin at janicec@bb-cpa.com and insert "eBulletin" in the subject line. You will be added to the list. We do not share our lists.

eBulletin 2009-2
February 25, 2009

New Federal Withholding Tables Issued

The IRS has issued new withholding tables that reflect the making work pay tax credit included in the recently enacted economic stimulus package. The tables are effective immediately and must be implemented no later than April 1, 2009.

For more information, go to the IRS website at http://www.irs.gov/pub/irs-pdf/n1036.pdf.

Disclaimers: This written advice is not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer. This eBulletin contains general information and cannot substitute for individual consultation. You should obtain professional advice before making financial business or tax decisions.

eBulletin 2009-1
February 20, 2009

American Recovery and Reinvestment Act of 2009

The American Recovery and Reinvestment Act of 2009, more commonly known as the economic stimulus act, includes a number of tax provisions. They include the following.

  • A new tax credit equal to the lesser of 6.2 percent of the individual's earned income or $400 ($800 for married couples filing jointly). This credit applies to 2009 and 2010. Earned income includes self employment income. The credit phases out as a taxpayer's modified adjusted gross income exceeds $75,000 ($150,000 for joint returns). Nonresident aliens and individuals who may be claimed as a dependent are not eligible for the credit.
  • A onetime payment of $250 to individuals on certain forms of fixed incomes (primarily Social Security recipients, railroad retirees, and disabled veterans). Retired government workers, who generally are ineligible for Social Security, also will receive one-time payments of $250. These payments will reduce any the credit mentioned above to which the individual would otherwise be entitled.
  • An increase in the 2009 alternative minimum tax exemption to $70,950 for joint filers and surviving spouses and $46,700 for singles and heads of households.
  • An increase in the first-time homebuyer credit to $8,000 and an extension of the credit through November 30, 2009. This credit, equal to 10% of the purchase price of a new home first became available on April 9, 2008. The maximum credit was $7,500 for homes purchased in 2008. The 2008 credit was subject to a recapture provision, which effectively required the taxpayer to repay the credit over a 15 year period. This provision has been eliminated for purchases in 2009, unless the home is sold within 36 months. Note that a "first-time" homebuyer is defined as someone who did not have a ownership interest in a principal residence in the prior three years.
  • A deduction for state and local sales tax or excise tax paid on the purchase of a new vehicle not weighing over 8,500 gross pounds, effective on or after the date of enactment through the rest of 2009. The deduction is limited to the first $49,500 of purchase price. It phases out as your income goes above $125,000 ($250,000 for joint returns). Sales tax paid on a lease agreement doesn't qualify.
  • A temporary increase in the HOPE education credit (now known as the "American Opportunity Tax Credit") to a maximum $2,500 per year, but only for 2009 and 2010. In addition, the credit applies to all four years of college and includes the cost of course materials. Finally, the phase-out range is increased. 40% of the credit is refundable (meaning that the credit is not limited to the amount of your income tax to that extent).
  • Excludes from taxable income up to $2,400 of unemployment compensation received in 2009.
  • In 2009 and 2010, allows tax-free distributions to beneficiaries from qualified tuition (Section 529) programs for the purchase of computers and computer technology.
  • Extends the 50% bonus depreciation allowance through December 31, 2009.
  • Increases the amount of fixed asset purchases that can be expensed (section 179 deduction) to $250,000 and increases the threshold for reducing the deduction to $800,000 for years beginning in 2009. These amounts would have gone down in 2009 otherwise.
  • Changes the required estimated payment installments for 2009 for "qualified" individuals to the lower of 90% of the current year's tax or 90% of the prior year's tax. A qualified individual is one whose adjusted gross income for the prior year is less than $500,000 ($250,000 in the case of a married taxpayer filing a separate return) and who certifies that more than 50% of the income shown on the prior year return was income from a business whose average number of employees for the calendar year was less than 500.
  • Allows qualified small businesses to elect to carry back net operating losses up to five years. Normally, businesses can only carry NOLs back two years. A qualified small business is one whose average gross receipts over the last three years are $15 million or less. This provision only applies to NOLs arising in years ending in 2008. However, a fiscal year business can elect to apply it to its fiscal year beginning in 2008.
  • Allows certain businesses to elect to recognize cancellation of indebtedness income over five years, beginning in 2014, for specified types of business debt repurchased by the business after December 31, 2008, and before January 1, 2011. An applicable debt instrument under the new law means a bond, debenture, note, certificate, or any other instrument constituting indebtedness issued by a C corporation or any other person in connection with the conduct of a trade or business by such person.
  • Suspends the built-in gains tax in 2009 and 2010 for Subchapter S corporations who have passed the seventh year of the ten-year recognition period following the effective date of their S election.

BB Recommends: Obviously we have to leave out the details. If you think that any of these provisions apply to you, contact your BB professional.

Disclaimers: This written advice is not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer. This eBulletin contains general information and cannot substitute for individual consultation. You should obtain professional advice before making financial business or tax decisions.

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